Ongoing investment-sale activity for malls suggests a positive outlook for the Singapore retail leasing sector, reports Edmund Tie & Company – especially for properties well connected to public transport and offering experiential and activity-based retail options.
In a report Q2 2019 Real Estate Times for the Singapore market, the property company projects islandwide rental growth will be mixed, ranging from a 2 per cent decline to a 2 per cent increase this year. The low supply pipeline from next year onwards is likely to provide some underlying support to occupancy rates and rental levels.
For the second consecutive quarter, investment transaction value (of properties valued above S$100 million) jumped more than 52 per cent quarter on quarter with two transactions totalling $961 million. The largest sale was Chinatown Point for $520 million to a foreign institutional investor.
The net supply of space fell by about 78 per cent as fewer projects were completed. As such, islandwide occupancy declined slightly by 0.4 percentage points to 90.1 per cent in the first quarter, however, the opening of Funan mall with 325,000sqft net lettable area – with 95 per cent of space pre-leased – is not expected to significantly impact occupancy rates in the second quarter.
Singapore retail leasing rates across the different market segments remained largely flat, as occupancy rates remained high for malls located in prime positions. Upper-storey retail in the Orchard Road/Scotts Road area likely fell slightly due to weakened tourist spending, while the prime malls in the suburban areas continue to attract major brand retailers and new-to-market brands.
The net demand and supply for retail spaces in suburban areas slowed in the first quarter, with the occupancy rate down marginally. Prime-located malls with easy transportation access and a diverse and well-managed tenant mix continued to perform relatively well.
New openings included Cafe Amazon outlets at Jewel Changi and Jurong Point Shopping Centre, and Xing Fu Tang (a Taiwanese bubble tea chain) opened a permanent store at Century Square in the second quarter.
New space supply pipeline
From the third quarter of this year through to 2022, some 1.1 million sqft of retail space is expected to come onstream, with the majority of that to be completed in the second half of this year. The largest will be the Paya Lebar Quarter mall of about 313,000sqft.
The average annual pipeline of known projects from next year through to 2022 is less than 150,000sqft, which is substantially below the three- and five-year average.